Is there a Social Media Bubble?

Submitted on Thu, Jun 9th, 2011 1:57 am

The Dot Com Bubble, which swelled in 1995 and popped in 2001, was
to the nineties what the Gold Rush was to the 1850s.&nbsp; An onslaught of entrepreneurs flocked to
brave new worlds: California
and this strange new land called the internet.&nbsp; Dot Coms were like virtual gold. In California, the gold eventually just ran
out; however, the people stayed, and today California is the most populated state in America.&nbsp;&nbsp;
The Dot Com Bubble burst on March 10, 2000, when sell-orders for several
high-tech stocks were coincidentally processed on the same day.&nbsp; This triggered a chain reaction of selling,
and NASDAQ began to fall quickly.&nbsp; When
September 11 happened, the country was on its way to a recession.&nbsp; By 2004, only 50% of the original Dot Com
companies had survived.&nbsp;&nbsp;
Still, the new internet land had been founded, and people started
residing there, too.&nbsp; Today, there is
nary a major or minor business that doesn&rsquo;t have its own website. An entire
industry of marketing professionals, web developers and social media experts
continues to grow throughout the turmoil. After all, where there is money to be
made &ndash; there must be a structure (professionals) to support it.&nbsp;
In 2011, the economy is facing a similar scenario to that of the
Dot Com bubble&rsquo;s precarious beginnings; people are buying up slices or whole
parts of social media networks.&nbsp; In May,
Microsoft purchased Skype for a whopping 8.5 billion dollars.&nbsp; Meanwhile, on May 19, LinkedIn, the Social Networking
site aimed at business professionals, went from $49 to $120, back down to $90
over the course of the day.&nbsp; Economists
are shocked at the valuation put on the company, insisting it is
overpriced.&nbsp; The situation bore a remarkable
resemblance to the 1999 debut of AKAM,
a tech company whose shares soared from $17 to $149, despite the fact the
company had no profits to show its investors.&nbsp; Which of course begs the question, is history repeating itself?&nbsp; And if it is, has anyone learned anything?&nbsp;
Probably not. The lure of fast money is often too great to
resist.&nbsp; However, the economy has yet to
recover from the Housing Bubble and Credit Crisis of 2007-2009.&nbsp; If a social media bubble is forming, and it
does pop, it could prove devastating for an already fragile economy.&nbsp;
On the other hand, optimists believe that social media is strong
and flexible enough to ride out economic crises.&nbsp; Social media, from MySpace to Facebook, from Twitter
to Groupon, has constantly evolved in order to keep churning out money.&nbsp; Social media depends on the support of its
advertisers; therefore, growing and changing to meet its advertisers&rsquo; demands,
as well as the demands of the consumer, is critical.&nbsp; Unlike Dot Coms, which lacked the capacity to
evolve, Social Networks have to be at the top of their game every day in order
to survive.&nbsp;&nbsp;
Are we looking at a social media bubble or simply the evolution of
news and entertainment?&nbsp; It is perhaps
still too early to tell.&nbsp; However, when
looking at a potential bubble, conservative buying could hypothetically save
both our wallets as well as Social Networking Websites.&nbsp;&nbsp;
References: Wikipedia.org (1),
Wikipedia.org (2), SeekingAlpha.com,
OurSocialTimes.com
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